Schweitzer v. Inv. Comm. of the Phillips 66 Sav. Plan
| Decision Date | 09 May 2018 |
| Docket Number | CIVIL ACTION NO. H–17–3013 |
| Citation | 312 F.Supp.3d 608 |
| Parties | Jeffery SCHWEITZER, Jonathan Sapp, Raul Ramos, and Donald Fowler, ON BEHALF OF the PHILLIPS 66 SAVINGS PLAN and a class of all others similarly situated, Plaintiffs, v. The INVESTMENT COMMITTEE OF the PHILLIPS 66 SAVINGS PLAN, Sam Farace, and John Does 1–10, Defendants. |
| Court | U.S. District Court — Southern District of Texas |
Douglas P. Needham, Mark Peter Kindall, Robert A. Izard, Jr., Izard Kindall et al., West Hartford, CT, Gregory Yann Porter, Bailey Glasser LLP, Washington, DC, Mark George Boyko, Bailey & Glasser LP, Clayton, MO, Thomas Robert Ajamie, Ajamie LLP, Houston, TX, for Plaintiffs.
Travis James Sales, Michael Byron Bennett, Tina Q. Nguyen, Baker Botts LLP, Houston, TX, for Defendants.
Plaintiffs, Jeffery Schweitzer, Jonathan Sapp, Raul Ramos, and Donald Fowler, bring this action pursuant to Sections 404, 405, 409, and 502 of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1104, 1105, 1109, and 1132, on behalf of the Phillips 66 Savings Plan (the "Plan" or the "Phillips 66 Plan") and a class of similarly situated participants in the Plan whose retirement assets were invested in the "ConocoPhillips Stock Fund" and the "ConocoPhillips Leveraged Stock Fund" (together, the "ConocoPhillips Funds") through the Plan during the period from May 2, 2012, to the date of judgment in this action (the "Class Period")1 against defendants, the Investment Committee of the Phillips 66 Savings Plan (the "Committee"), individual members of the Investment Committee, John Does 1 through 10, and Sam Farace, the Plan's Financial Administrator (collectively "Defendants"). Pending before the court is Defendants the Investment Committee of the Phillips 66 Savings Plan and Sam Farace's Motion to Dismiss Plaintiffs' Class Action Complaint with Brief in Support ("Defendants' Motion to Dismiss") (Docket Entry No. 15). For the reasons explained below, Defendants' Motion to Dismiss will be granted.
Phillips 66 Company, Inc. ("Phillips 66") was incorporated in Delaware in 2011 as a wholly owned subsidiary of ConocoPhillips Corporation ("ConocoPhillips"). On April 30, 2012, Phillips 66 was spun-off from ConocoPhillips and became a separate, independent company. As a result of the spinoff approximately 12,000 former ConocoPhillips employees became Phillips 66 employees. Phillips 66 established the Plan on May 1, 2012, for Phillips 66 employees in connection with the spinoff. The Plan is an employee benefit plan within the meaning of ERISA Sections 3(3) and 3(2)(A), 29 U.S.C. §§ 1002(3) and 1002(2)(A). The Plan is a "defined contribution" or "individual account" plan that maintains individual accounts for each participant within the meaning of ERISA Section 3(34), 29 U.S.C. § 1002(34).3 Participants designate the manner in which amounts allocated to their accounts will be invested in an array of investment funds. ConocoPhillips employees are not eligible to participate in the Plan.
Assets of Phillips 66 employees who were former ConocoPhillips employees that were held in participant accounts under the ConocoPhillips Savings Plan ("ConocoPhillips Plan") were transferred to the Phillips 66 Plan. Included among the assets transferred from the ConocoPhillips Plan to the Phillips 66 Plan were shares of ConocoPhillips stock. The shares were originally contributed by ConocoPhillips to an employee stock ownership plan ("ESOP") and held in the ConocoPhillips Funds of the ConocoPhillips Plan. After the spinoff the shares became part of the ConocoPhillips Funds in the Phillips 66 Plan. The ConocoPhillips Funds invested exclusively in ConocoPhillips stock. The ConocoPhillips Funds were closed to new investments after the spinoff, but participants of the Phillips 66 Plan could "exchange out of the funds at any time."4
The Board of Directors of Phillips 66 appointed the Phillips 66 Savings Plan Committee. The Committee is a named fiduciary with respect to the general administration of the Plan having "all powers necessary or desirable to discharge the duties relating to the administration of the Plan as are delegated to it by the Plan and Trust Agreements...."5 Defendant Sam Farace is the Plan Financial Administrator who "shall be a fiduciary and shall have responsibility to manage and control the assets of the Plan in accordance with the terms of the Plan...."6
Plaintiffs allege that Defendants breached their fiduciary duties of diversification and prudence by retaining the ConocoPhillips Funds in the Plan after the spinoff because the ConocoPhillips stock no longer qualified as an "employer security" under ERISA. Defendants move to dismiss Plaintiffs' claims for failure to state a claim under Rule 12(b)(6).7
Under Rule 8 of the Federal Rules of Civil Procedure a pleading must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). A Rule 12(b)(6) motion tests the formal sufficiency of the pleadings and is "appropriate when a defendant attacks the complaint because it fails to state a legally cognizable claim." Ramming v. United States, 281 F.3d 158, 161 (5th Cir. 2001), cert. denied sub nom. Cloud v. United States, 536 U.S. 960, 122 S.Ct. 2665, 153 L.Ed.2d 839 (2002). The court must accept the factual allegations of the complaint as true, view them in a light most favorable to the plaintiff, and draw all reasonable inferences in the plaintiff's favor. Id.
To defeat a motion to dismiss pursuant to Rule 12(b)(6) a plaintiff must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1974, 167 L.Ed.2d 929 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (citing Twombly, 127 S.Ct. at 1965 ). "The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. (quoting Twombly, 127 S.Ct. at 1965 ). "Where a complaint pleads facts that are ‘merely consistent with’ a defendant's liability, it ‘stops short of the line between possibility and plausibility of entitlement to relief.’ " Id. (quoting Twombly, 127 S.Ct. at 1966 ).
When considering a motion to dismiss, district courts are "limited to the complaint, any documents attached to the complaint, and any documents attached to the motion to dismiss that are central to the claim and referenced by the complaint." Lone Star Fund V (U.S.), L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010). "Federal courts are required to dismiss, pursuant to Federal Rule of Civil Procedure 12(b)(6), claims based on invalid legal theories, even though they may be otherwise well-pleaded." Flynn v. State Farm Fire and Casualty Insurance Co. (Texas), 605 F.Supp.2d 811, 820 (W.D. Tex. 2009) (citing Neitzke v. Williams, 490 U.S. 319, 109 S.Ct. 1827, 1832, 104 L.Ed.2d 338 (1989) ). "[W]hen the allegations in a complaint, however true, could not raise a claim of entitlement to relief, this basic deficiency should ... be exposed at the point of minimum expenditure of time and money by the parties and the court." Cuvillier v. Taylor, 503 F.3d 397, 401 (5th Cir. 2007) (quoting Twombly, 127 S.Ct. at 1964–65 ) (quotations omitted); see also Exxon Mobil Corp. v. FX Networks, LLC, 39 F.Supp.3d 868, 870–71 (S.D. Tex. 2014).
Claims asserted under ERISA are subject to the notice pleading standard of Federal Rule of Civil Procedure 8, which "substitute[d] the requirement of ‘a short and plain statement of the claim showing that the pleader is entitled to relief’ for the technical formula, such as ‘facts constituting a cause of action,’ which typified the preexisting codes." Heimann v. National Elevator Industry Pension Fund, 187 F.3d 493, 509 (5th Cir. 1999), overruled on other grounds, Arana v. Ochsner Health Plan, 338 F.3d 433 (5th Cir. 2003) (quoting Charles A. Wright and Arthur R. Miller, Federal Practice and Procedure, § 1202 at 68 (2d ed. 1990) ). See also Swierkiewicz v. Sorema N. A., 534 U.S. 506, 122 S.Ct. 992 998, 152 L.Ed.2d 1 (2002) ().
ERISA is a statutory scheme enacted by Congress to protect employees' rights to benefits while also encouraging employers to develop employee benefits programs. Martinez v. Schlumberger, Ltd., 338 F.3d 407, 411 (5th Cir. 2003) ). "ERISA assigns to plan fiduciaries ‘a number of detailed duties and responsibilities, which include the proper management, administration, and investment of [plan] assets, the maintenance of proper records, the disclosure of specific information, and the avoidance of conflicts of interest.’ " Laborers National Pension Fund v. Northern Trust Quantitative Advisors, Inc., 173 F.3d 313, 317 (5th Cir.), cert. denied, 528 U.S. 967, 120 S.Ct. 406, 145 L.Ed.2d 316 (1999) (quoting Mertens v. Hewitt Associates, 508 U.S. 248, 113 S.Ct. 2063, 2066, 124 L.Ed.2d 161 (1993) ).
ERISA requires employee benefit plans to be established and maintained pursuant to a written instrument that provides for one or more "named fiduciaries who jointly or severally shall have authority to control and manage the operation and administration of the plan." 29 U.S.C. §...
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Myers ex rel. Seventy Seven Energy Inc. v. Admin. Comm., Seventy Seven Energy, Inc., Case No. CIV-17-200-D
...of one district court decision that has addressed the issue and rejected their position. See Schweitzer ex rel. Phillips 66 Sav. Plan v. Inv. Comm., 312 F. Supp. 3d 608 (S.D. Tex. 2018), appeal filed, No. 18-20379 (5th Cir. June 12, 2018) (oral argument held March 11, 2019). In Schweitzer, ......